VinaCapital’s Head of Business Development on Vietnam’s Dynamic Economy and the Wealth Management Industry’s Huge Potential
When Hubbis last met up with Eric Levinson, Head of Business Development at Ho Chi Minh City- headquartered VinaCapital, he told us that the mission of the firm in the global context is to deliver Vietnam to the world and in the local context, offer a wider range of carefully curated investments to the expanding ranks of domestic investors. And that is exactly what they have been achieving, growing at a remarkable pace in 2020 and even faster in 2021. The firm provides access to mutual funds, ETFs and managed accounts, and across asset classes, including listed equities, fixed income, real estate, private equity, venture capital, as well as clean energy and infrastructure. Recognising the importance of ESG, VinaCapital has also been focused on strengthening its capabilities in that area and developing new ways to measure and implement best practices across its investments. We recently enjoyed another conversation with Levinson, who explained that despite arriving at VinaCapital in the midst of the worst of the pandemic in mid-2020, he has enjoyed the challenges he has faced in helping build the firm’s asset management business, which has had remarkable success in expanding its penetration amongst domestic investors as well as drawing more international money into Vietnam’s economy and financial markets. With Vietnam’s mid-March reopening of its borders to visitors with valid vaccination status, and the local economy remaining so robust, Levinson anticipates great growth potential ahead.
VinaCapital is one of the leading asset and investment management firms in Vietnam, dating back to the 2003 London listing of its VinaCapital Vietnam Opportunity Fund, a closed-end, multi-asset strategy. By the end of 2021, VinaCapital’s total AUM had risen to USD3.9 billion, making it one of the largest investment managers in the country.
“We are very unique in Vietnam,” Levinson reports, “as our investment platform spans multiple mainstream public asset classes, as well as offers broad access to alternatives such as private equity, VC, real estate, and we have made a real specialisation in renewable energy, primarily solar, wind, and also liquid natural gas. Our real added value is our dedicated teams that manage each of those asset classes, so the sum is greater than the individual parts. With the collaborative culture we have developed internally, our teams interact and cross-fertilise their expertise, so for example, our UCITS fund team benefits from communicating with our venture capital team, with the private equity team, and so forth. And our relationships across Vietnam’s corporate world and amongst decision and policymakers are really unmatched.”
Reaching out across the globe
Levinson’s key role is developing the business profile of the firm and helping with promoting fundraising across multiple platforms, with a primary focus on asset management. “I have a lot of interaction with foreign investors to discuss their objectives, their timeframes, and their risk appetites,” he reports. “More broadly, our mission is to help develop the business links and partnerships with international firms that are needed to fully tap into the enormous growth potential ahead.”
After some 19 plus years in operation, VinaCapital has built a deserved reputation from its core offerings of open-ended funds, which are domiciled in Vietnam, its open-ended UCITS-compliant fund VVF, which is domiciled out of Luxembourg, and the London Stock Exchange-listed FTSE 250 flagship VinaCapital Vietnam Opportunity Fund (LN:VOF), which features investments in listed and private equities, and is the only Vietnam-focused fund to pay a dividend. The firm also offers co-investments and managed accounts for private equity and real estate, primarily for international institutional clients.
Energised by opportunity
Levinson joined VinaCapital in April 2020 and moved to the country in July of that year as the government started to get to grips with the pandemic. He has quickly made the transition, energised by the opportunities afforded by a dynamic frontier economy that is heading towards emerging market status and growing exponentially in so many areas.
Vietnam is following a similar path to other more advanced countries in the region, for example, Indonesia or Thailand, and the pace of development is perhaps even more dynamic as access to global capital has accelerated dramatically in recent decades.
The new SE Asian economic miracle
“Vietnam is the next and perhaps final Asian Tiger economy,” he observes, “so we are seeing those secular trends of urbanisation, the fast-expanding middle class, rising consumer spending, and the diversifying economic footprint, all of which happened in South Korea, Taiwan, and Thailand decades earlier.”
Yet Levinson maintains there is perhaps greater stability allied to the dynamic growth than the ASEAN and broader Asian emerging economies enjoyed. Perhaps some of the lessons of the Asian crisis of 1997 and the global financial crisis of 2008-9 have been learned by policymakers, who appear keen to help deliver growth with less volatility.
Stability is key to growth
“Vietnam has made a conscious decision, going back to around 2015, to have a very stable currency,” Levinson explains. “As a foreign investor, that helps, as the Vietnamese Dong has been incredibly stable against the major currencies and the other regional currencies for at least seven years, and the outlook remains s favourable now. This helps foreign investors in their decision making, as currency risks are somewhat off the table, so they can focus attention on the economy and the market opportunities.”
He briefly runs through some of the key appeals of Vietnam currently, including GDP growth projected at 6.5% or more for 2022 and earnings rising at around 20% or more for the universe of main listed stocks. “Our Portfolio Managers are then selecting their high conviction ideas, so they are essentially buying into higher earnings growth, and we are seeing earnings growth of roughly 40% in many of our portfolios. In short, buying Vietnam means buying growth.”
Seeing things at first hand
Levinson was living in New York before he took up his role at VinaCapital in mid-2020 and has been surprised by the pace of wealth creation taking place. “Living here, I understand the level of wealth creation within the economy,” he reports. “The first investment is always property, and the second investment too, as people want to have a physical foothold. They typically have very, very long timeframes for their real estate holdings, owning land and properties for generations. And as they develop their wealth, they then diversify.”
A rapid shift to financial assets
He says that, for example, local investors have been expanding into more portfolio investments, with 2 million brokerage accounts opened since the pandemic out of the total of 5 million accounts nationwide currently. They are diversifying assets and moving into areas such as bancassurance. The country’s expanding ranks of HNW and UHNW clients are even more dynamic in terms of their portfolio and asset class diversification. In the past, when interest rates were so high and the capital markets so thin, it was so simple just to obtain high returns from bank deposits and corporate bonds.
“This is the story of a fast-growth emerging economy where wealth creation is taking place at an incredible pace, and the middle class is growing so rapidly,” he reports.
“In such an environment of diversification and rising consumption, there is huge opportunity across the board, so the entrepreneurial culture is deeply embedded and highly rewarding. As this happens, there are more and more very wealthy and ultra-high net worth individuals and families.”
Partners for the future
VinaCapital has a mission to uncover and invest in the best investment opportunities in Vietnam. To do so, the firm continues to draw upon its history of deep research and creating solutions with strong partners.
“When we opened our first venture capital portfolio, we did so with a partner from Silicon Valley,” he reports. “Similarly, when we started our private equity portfolio, we selected several partners from around the world. More recently, we just formed a partnership with a leading distributor in Taiwan to launch a sub-advised mutual fund, which launched in January 2022. And we work with foreign investors to access this market through feeder funds, or perhaps jointly with them. In short, we are very open to, and experienced in, partnering with firms outside Vietnam to create bespoke investment solutions that fit their client base.”
The winds of change…
Levinson notes that Vietnamese investors can still not invest outside Vietnam, so the domestic wealth management opportunity is particularly strong. “The potential is still in the future, and as yet there are no signs of regulatory change, but the market does expect liberalisation at some point,” he explains. “The thinking is that when Vietnam achieves the upgrade from a frontier market to EM status, that will help create a lot more liquidity as much more foreign capital will flow in. At that stage, it’s possible that perhaps regulatory liberalisation will occur for local investors to invest offshore, on a gradual basis, likely with rules based on what has happened in other markets.”
“As I mentioned, we have seen two million new brokerage accounts in the last two years,” he reports, “and the banks have realised that there is an opportunity to give people access to financial markets in a professional, risk-managed manner, and we anticipate further regulatory evolution in the coming years will facilitate the growth of the wealth management business.”
He says that as the demand for private wealth services in Vietnam is expanding faster than solutions being created, the potential is enormous, and there is tremendous demand for solutions outside the traditional banking products. There is also demand for advice on how to manage the growing private wealth as more of the wealth moves into investments and away from traditional bank deposits and simpler solutions.
The wealth model evolves
As he looks ahead to the next five-years, he sees these factors continuing and predicts that there will be a significant increase in the number of firms in the wealth and advisory sector. “The domestic banks will lead the way, with the more determined of them already taking steps to serve the demand and others finding their way into the market,” he reports.
He adds that securities firms are also expanding their offerings from predominantly individual equities and margin lending to move into the mutual fund sector. And a further trend is the introduction of many more digital platforms offering their direct B2C models, some only with mutual funds and others presenting the market with more diversified platforms. “With a young, digitally savvy population in Vietnam, it’s no surprise that digital transformation is impacting wealth management,” he says, “and that means the future of the wealth industry here will very much be a combination of the traditional personal advisory model and the digital B2C model.”
A key mission for the foreseeable future is the communication of the firm’s model and its successes. “Our performance across all of our solutions in the last three years has been fantastic, particularly in 2021,” he reports. “Our UCITS fund was up 49.5% versus 37% for the Vietnam Index in 2021, and this year, we started up 5.5% in the first quarter while the market was down marginally. We've been able to consistently deliver outperformance. Now it's a matter of getting these stories into the right circles, including the family offices, wealth platforms, and potential distributors. When we look at our offshore platform, we'd really like to grow our UCITS fund, and that is what we intend to do.”
Domestically, he says the firm’s performance was incredibly strong as well, and VinaCapital will be embarking on a significant marketing campaign to help the emerging middle-class understand the benefits of professional asset management. “Remember, most people here are fairly new to investing. They do not really have much experience with mutual funds, and education is needed to expand their knowledge and build their understanding of the benefits of hiring a trusted advisor to expedite the mission of long-term investing,” he explains. “So, we have been working to make sure that the VinaCapital brand, which is widely respected as an institutional asset management firm, is also understood by local retail investors in Vietnam as a firm that can help them grow their wealth.”
The other priority is to boost the corporate sustainability initiative and expand the green energy platform. “This is really an institutional platform where we already have partnerships with large global firms, including EDF of France, and is an area we want to build on and expand the strategic focus from a business perspective and also for the development of Vietnam itself.”
Opening up, ready for the world
He draws the discussion towards a close by observing that Vietnam has enjoyed some positive press for the government’s handling of the pandemic over the past two years and has achieved one of the highest vaccination rates in the world. “As of March 15, vaccinated travellers can now come to Vietnam without worrying about quarantine, and that is a major step forward,” he reports. “Vietnam is open again for business travel and tourists, and we are just seeing the start of the renewed vigour and activity, all of which augurs well for the country.”
His final comment is that there is a palpable sense of optimism in Vietnam, a firm belief on the ground that the future is going to be brighter than the past, and that Vietnam is writing the next exciting chapters of its story. “For investors who are looking at Vietnam, the entrepreneurial spirit, the political stability, the drive amongst the people, and the optimism are an incredible cocktail, and the outlook therefore for a firm such as VinaCapital is really remarkable.”
Getting Personal with Eric Levinson
Levinson has now been with VinaCapital for two years, joining in April 2020 and moving to Ho Chi Minh in July that year as the country grappled with the pandemic. “I have loved every moment of the business adventure here,” he reports. “It is really a great place to be, with incredible dynamism that is a reflection of the country at large.”
He has over 25 years of experience in asset and wealth management, and before joining VinaCapital held senior roles in management, sales, and strategy as a Managing Director at AllianceBernstein, Hartford Funds and New York Life. He earned a BA from Occidental College in Diplomacy & World Affairs, with a Minor in Asian Studies.
Over the course of my working life, a common theme is that I have worked with professional investors to help them solve problems on behalf of their clients and raised billions of dollars working for asset managers across the world. Vietnam was a natural landing spot for me at this stage in my career, and it has been an exciting journey thus far – it’s just such a fantastic opportunity.”
Levinson is a passionate traveller and has visited over 50 countries and is very excited to be able to resume exploring the world in 2022.
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